Greece expects to bridge gap with creditors

Greece expects to bridge a fiscal gap with international creditors by Monday to unblock access to billions of euros in badly needed loans, Greek Finance Minister Yannis Stournaras said on Wednesday.

Stournaras said an agreement would be reached by “Monday’s eurogroup,” a reference to a meeting of eurozone finance ministers in Luxembourg.

He acknowledged that the difference with creditors was still “quite big,” but insisted that a deal could be reached with auditors from the EU, the IMF and the European Central Bank.

Stournaras was positive the gap would be closed, saying: “They will come over to our views, we will go to theirs,” in remarks to reporters.

The finance minister said he had “no knowledge” of rumored plans by European leaders to establish a broader crisis plan involving other struggling eurozone economies such as Spain.

Greece needs to gain access to 31.5 billion euros (US$40.7 billion) in loans from a second EU-IMF bailout program that have been held up for several months.

Stournaras told yesterday’s edition of Germany’s Bild daily that he expects the auditors’ report to be ready by the middle of this month and was confident that Greece would receive funds before the end of the month.

Contrary to reports, there was “no misunderstanding” with the troika and talks were on the right track, Stournaras said.

Separately, the Portuguese government announced a generalized income tax hike on Wednesday, one of several new austerity measures meant to replace earlier proposals that met with stiff popular opposition.

At a news conference, Portuguese Finance Minister Vitor Gaspar unveiled a 4 percent extraordinary tax and said that Portugal’s income tax brackets would also be reduced from eight to five.

The average tax hike would rise from 9.8 percent this year to 13.2 percent next year, the minister said, without indicating how much extra revenue would be raised by the measure.

“The adjustment is harder than we anticipated,” Gaspar said, as he also revealed that the unemployment forecast for next year had been raised to 16.4 percent, from a previous forecast of 16 percent.

New measures also include new levies on capital gains and a financial transaction tax, though details of these moves have yet to be finalized, the minister said.

The new budget measures, which are to be presented to parliament on Oct. 15, were shown to European Commission President Jose Manuel Barroso on Monday.

Reassured by the plan, Barroso, a former Portuguese prime minister, said he was in favor of paying out the latest installment of Portugal’s 78 billion euro bailout.

Barroso added that he expected eurozone partners to follow suit.

The granting of this new slice of aid is contingent on Portugal passing measures worth 4.3 billion euros in the next year’s budget.

Spending cuts and economic reforms have caused a recession, with the economy shrinking by 1.2 percent in the second quarter, much faster than the 0.1 percent rate in the first quarter.

The contraction is expected to reach 3 percent for the year.

Earlier in the day the Portuguese debt agency successfully completed a bond exchange, buying up sovereign bonds set to mature next year and in return emitting new bonds with a 2015 expiry date at lower rates.

The Portuguese government has not attempted auctioning bonds outright on the markets since it requested a bailout in spring last year and has only carried out short-term operations.